Commercial, Speculative Newbuild

We were approached by a client looking for funding for a newbuild commercial development of 15 small industrial units. His intention was to retain half as investments and sell the remaining 50% to repay the debt.

His background was in property renovations but he had not undertaken any commercial developments before. In addition, his property was an Isle Of Man Registered Limited Company.

Whereas many lenders are happy to allow the build of new residential properties on a speculative basis (ie where no pre-sales have been achieved), this is more difficult in the commercial sector as there is a greater risk of the completed units standing empty or sales not being achieved.

We worked with the client to draw up a phased development proposal where half the units would be build and sold/rented prior to the second phase being started. In this way, the amount of funding required was reduced as was the risk to the lender. By doing this we were able to secure funding of £500,000 at a rate of 7% p.a. to enable completion of the first phase and an agreement to fund phase two upon successful completion of phase 1.